Banking Corp. v. Lui She

Justina Santos executed on a contract of lease of real properties in favor of Wong.The lease was for 50 years, although the lessee was given the right to withdraw at any time from the agreement.

Subsequently, she executed another contract giving Wong the option to buy the leased premises for P120,000, payable within ten years at a monthly installment of P1,000. The optionimposed on him the obligation to pay for the food of the dogs and the salaries of the maids in her household, the charge not to exceed P1,800 a month. The option was conditioned on his obtaining Philippine citizenship, a petition for which was then pending in the CFI of Rizal.

It appears, however, that this application for naturalization was withdrawn when it was discovered that he was not a resident of Rizal. On October 28, 1958 she filed a petition to adopt him and his children on the erroneous belief that adoption would confer on them Philippine citizenship. The error was discovered and the proceedings were abandoned.

In two wills, she bade her legatees to respect the contracts she had entered into with Wong, but in a codicil of a later date she appears to have a change of heart. Claiming that the various contracts were made by her because of machinations and inducements practiced by him, she now directed her executor to secure the annulment of the contracts.

ISSUE:

Whether the contracts involving Wong were valid.

RULING:

No, the contracts show nothing that is necessarily illegal, but considered collectively, they reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits. To be sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real property on condition that he is granted Philippine citizenship.

But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not only of the right to enjoy the land but also of the right to dispose of it.

Article 1416 of the Civil Code provides, as an exception to the rule onpari delicto, that “When the agreement is not illegalper se but is merely prohibited, and the prohibition by law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered.” The Constitutional provision that “Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines” is an expression of public policy to conserve lands for the Filipinos.

Accordingly, the contracts in question are annulled and set aside; the land subject-matter of the contracts is ordered returned to the estate of Justina Santos.